Saudi Arabia Petrochemicals Report

The Saudi government is targeting national petrochemicals output of 115mn tonnes in 2016, which represents a 46% increase since 2013. There are 26 petrochemicals projects under construction at a cost of USD15bn while another 42 are planned over the next five years at an estimated cost of USD46bn. However, there is the ongoing threat from growth in Iranian exports and the slowdown in the Chinese market. The scale of the Saudi industry should secure the country’s position as one of the highest-scoring petrochemicals-producing countries in the world. Moreover, the industry is moving increasingly towards mixed feedstock, which should allow some flexibility in defending margins in a low oil-price environment.

Saudi petrochemicals earnings have been hit hard by falling product prices as they are closely tied to the price of oil. Petrochemical producers’ profits are narrowing as product prices are linked to crude prices, which have remained stubbornly low. Saudi producers will be unable to compensate for the loss of this margin by increasing product prices. Instead, they will have to improve efficiency, although they are already some of the lowest-cost producers globally.